May 12 (Bloomberg) -- Rebels in eastern Ukraine said
they’re seeking to join Russia after disputed referendums
yesterday as the government in Kiev was handed a deadline to pay
for Russian gas to prevent supplies being cut off.

The self-styled Donetsk People’s Republic declared itself a
sovereign state today after saying 90 percent of voters backed
breaking away from Ukraine yesterday. Separatists in neighboring
Luhansk announced a similar move. Russia’s state-controlled gas
monopoly, OAO Gazprom, said Ukraine must pay for next month’s
supplies by June 2 or face a shutoff the next day.

The moves ratchet up tensions in eastern Ukraine, where the
government in Kiev and its U.S. and European allies accuse
Russian President Vladimir Putin of stoking unrest that’s
threatening to rip the former Soviet republic apart in the run-up to a May 25 presidential election. The events of the past two
days in eastern Ukraine echo those that preceded Putin’s
annexation of the Crimean peninsula in March.

“We have chosen a way of independence from the outrage and
the blood-stained dictatorship, fascism and nationalism of
Kiev’s junta,” Russia’s state-run RIA Novosti news service
cited Valery Bolotov, the governor of the self-proclaimed
Luhansk People’s Republic, as saying today. “We chose the way
of freedom.”

Company Sanctions

In Brussels, the European Union imposed sanctions on
companies in Crimea for the first time and threatened more
measures, along with the U.S., to target Russian industries.

“The preliminary results of the vote convincingly show the
real sentiment of citizens in the Donetsk and Luhansk regions
for the right to independently make decisions over questions
vital to them,” the Russian Foreign Ministry said on its
website. “We expect the Kiev authorities to take real action,
not make general declarations of intent, and hold urgent and
effective meetings with representatives of the southeast of
Ukraine that would lead to a stabilization of the situation.”

The U.S. and the EU deem the votes illegal and Ukraine’s
government denounced them.

‘Propagandistic Farce’

The referendums were “inspired by Russia’s leaders to
completely destabilize Ukraine, undermine presidential elections
and overthrow Ukraine’s authorities,” Ukraine’s acting
president, Oleksandr Turchynov, said on parliament’s website.
“This propagandistic farce will have no legal impact apart from
criminal responsibility for those who organized it.”

The balloting was “illegal under Ukrainian law” and a
“transparent attempt” to create further division, White House
spokesman Jay Carney told reporters in Washington. He said
there were cases of pre-marked ballots and children voting and
that the U.S. was “disappointed” Russia didn’t use its
influence to prevent the referendums from taking place.

Igor Girkin, known as Strelok or Shooter, who was named
today as the head of the rebel forces in the Donetsk region,
ordered all Ukrainian government troops and police to submit to
his command or leave the region within 48 hours. The rebels will
start an “anti-terrorist operation” against the Ukrainian
military if the deadline is ignored, the head of the separatist
group, Denis Pushilin, said by phone.

Gas Prepayments

Russia is moving Ukraine to prepayments for gas because it
owes $3.5 billion for fuel delivered in 2013 and through April
this year, Chief Executive Officer Alexey Miller said at a
meeting with Russian Prime Minister Dmitry Medvedev. Gazprom
will send Ukraine the bill tomorrow.

Ukraine, which depends on Russia for half of its gas
consumption, has the opportunity to pay as it received the first
$3.2 billion of an international aid package last week, Medvedev
said.

“It’s time to stop coddling them,” he said. “I think
that all possible ways to settle this situation -- one way or
another -- were undertaken by Gazprom.”

Stopping shipments to Ukraine may have a knock-on impact on
the rest of Europe because about 15 percent of the region’s
gas supply travels through the country’s Soviet-era pipelines.

EU foreign ministers added two expropriated companies in
Crimea and 13 people to its list of those sanctioned with asset
freezes and travel bans. The names will be released later today.

Broader Measures

They also vowed to accelerate preparations for broad
economic sanctions against Russia should it disrupt Ukraine’s
presidential election, pressing the Kremlin to back down in the
biggest standoff since the Cold War. NATO says there are about
40,000 Russian troops near the Ukrainian border.

“Preparatory work is under way,” EU President Herman Van
Rompuy told a news conference in Kiev this evening. “I want
Ukraine to remain strong and united.”

“Separatist referendums in the east of Ukraine are a
brutal mockery of democracy and are all part of the plan to
split the Ukrainian state,” Polish Prime Minister Donald Tusk
told officials in Warsaw. “We are dealing with a sophisticated
and so far unheard-of form of aggression and these referendums
have nothing to do with democracy.”

A study by the Pew Research Center found that 70 percent of
respondents in eastern Ukraine, where Russian is widely spoken,
and 93 percent in the west wanted the country to remain unified
within current borders.

Further sanctions against Russia risk undermining the
economies of some EU member nations. France’s government said
today it will deliver Mistral helicopter carriers to Russia as
planned, rejecting requests from its European and U.S. allies to
cancel the sale to punish Russia.

Ukrainian Prime Minister Arseniy Yatsenyuk has said
national reconciliation talks will start May 14, though it’s
unclear who’ll take part. Two months of clashes in the Donetsk
region have left 40 people dead and 245 hospitalized, the Unian
news service reported today, citing the governor’s office.